Question 1

If we are able to fully diversify,what is the appropriate measure of risk to use?

Accepted Answer

A)  Expected Return 
B)  Standard Deviation 
C)  Beta 
D)  Risk-free Rate of Return 
A)  Expected Return 
B)  Standard Deviation 
C)  Beta 
D)  Risk-free Rate of Return

Question 2

Stock A has the following returns for various states of the economy:
  Stock A's standard deviation of returns is

Accepted Answer

A)  12%. 
B)  29%. 
C)  37%. 
D)  43%. 
A)  12%. 
B)  29%. 
C)  37%. 
D)  43%.

Question 3

Most stocks have betas between

Accepted Answer

A)  -1.00 and 1.00. 
B)  0.00 and 1.00. 
C)  0.60 and 1.60. 
D)  1.00 and 2.00. 
A)  -1.00 and 1.00. 
B)  0.00 and 1.00. 
C)  0.60 and 1.60. 
D)  1.00 and 2.00.

Question 4

Assume that an investment is forecasted to produce the following returns: a 20% probability of a 12% return; a 50% probability of a 16% return; and a 30% probability of a 19% return.What is the expected percentage return this investment will produce?

Accepted Answer

A)  33.3% 
B)  16.1% 
C)  9.3% 
D)  15.7% 
A)  33.3% 
B)  16.1% 
C)  9.3% 
D)  15.7%

Question 5

A rational investor will always prefer an investment with a lower standard deviation of returns,because such investments are less risky.

Accepted Answer

A) True 
 B)False

Question 6

The expected rate of return from an investment is equal to the expected cash flows divided by the initial investment.

Accepted Answer

A) True 
 B)False

Question 7

Investment A has an expected return of 15% per year,while investment B has an expected return of 12% per year.A rational investor will choose

Accepted Answer

A)  investment A because of the higher expected return. 
B)  investment B because a lower return means lower risk. 
C)  investment A if A and B are of equal risk. 
D)  investment A only if the standard deviation of returns for A is higher than the standard deviation of returns for B. 
A)  investment A because of the higher expected return. 
B)  investment B because a lower return means lower risk. 
C)  investment A if A and B are of equal risk. 
D)  investment A only if the standard deviation of returns for A is higher than the standard deviation of returns for B.

If we are able to fully diversify,what is the appropriate measure of risk to use?

Stock A has the following returns for various states of the economy: Stock A's standard deviation of returns is

Most stocks have betas between

Assume that an investment is forecasted to produce the following returns: a 20% probability of a 12% return; a 50% probability of a 16% return; and a 30% probability of a 19% return.What is the expected percentage return this investment will produce?

A rational investor will always prefer an investment with a lower standard deviation of returns,because such investments are less risky.

The expected rate of return from an investment is equal to the expected cash flows divided by the initial investment.

Investment A has an expected return of 15% per year,while investment B has an expected return of 12% per year.A rational investor will choose

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Current Asset Management

International Business Finance

Filters

Exam 6: The Meaning and Measurement of Risk and Return

If we are able to fully diversify,what is the appropriate measure of risk to use?

Stock A has the following returns for various states of the economy: Stock A's standard deviation of returns is

Most stocks have betas between

Assume that an investment is forecasted to produce the following returns: a 20% probability of a 12% return; a 50% probability of a 16% return; and a 30% probability of a 19% return.What is the expected percentage return this investment will produce?

A rational investor will always prefer an investment with a lower standard deviation of returns,because such investments are less risky.

The expected rate of return from an investment is equal to the expected cash flows divided by the initial investment.

Investment A has an expected return of 15% per year,while investment B has an expected return of 12% per year.A rational investor will choose

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Current Asset Management

International Business Finance

Filters